Coordination in the market, science, and acquisition

I am suggesting, in fact, that the co-ordinating functions of the market are but a special case of co-ordination by mutual adjustment. In the case of science, adjustment takes place by taking note of published results of other scientists; which in the case of the market, mutual adjustment is mediated by a system of prices broadcasting current exchange relations, which make supply meet demand.

That was from Michael Polanyi’s classic, The Republic of Science. This coordination by mutual adjustment also applies to defense acquisition. Certainly the best military force structure is something complex and evolving — beyond the reach of any individual or small group. Indeed, the force structure depends on future achievements in science, technology, and the broader economy, a knowledge that is not accessible to anyone. This gives validity to the conflicting views of participants.

Polanyi was actually writing a reaction to calls for a centrally coordinated research program in Britain. Similar calls for this kind of central planning of the economy were also rife at the time. If a centralized structure predominated science and economy, then DoD adopting McNamara’s Planning-Programming-Budgeting System made sense because it could “plug” into those plans. However, since science and the economy actually work in a more market-oriented fashion, DoD should also rely on the process of mutual adjustment.

I think it is well established that the military services had, in the 1950s and before, relied on the process of mutual adjustment. The Army technical services and the Navy bureaus had their own appropriations that they defended before Congress. These power centers coordinated, sometimes well and sometimes poorly, in a more informal network. Harvard researchers Peck and Scherer noted the “multi-buyer” aspect of defense acquisition that predominated up until their writing in 1962.

One interesting point is that when economic or scientific activity is not coordinated through a centralized programming system, it incentivizes the participants to seek fame or fortune by finding flaws in existing activities. In other words, it incentivizes non-conformity and experimentation.